Honda uses flexible plans in the manufacturing of its cars. Discuss whether this method of production results in optimum output. You can access and cite some info from here: The Wall Street Journal, September 23, 2008, p. B1.© BrainMass Inc. brainmass.com October 25, 2018, 7:33 am ad1c9bdddf
Let's keep this simple:
The concept is that the production system can rationally respond to changes.
Here's the WSJ article that I used:
In the Honda case, the issue is that the plant can shift from one model to another without losing much time (and money). The idea is to shift over without having to retool very much. What is happening is that (especially in computer controlled methods) different programs can be uploaded, depending on how demand is being interpreted. This permits Honda (and others) to constantly change their production methods rapidly in response to changes in demand, fuel prices, or the economy in general. This is both Machine Flexibility and Production Flexibility.
In addition, these plants can change over to different models ...
The solution discusses the optimum output.
Given Demand, derive marginal revenue, calculate profit maximizing level of output, and find loss in surplus.
Assume the graph attached represents the market demand for a patented prescription drug together with the long run marginal cost and average cost functions for producing the drug. (note: the diagram assumes that at output levels over 50 million AFC ~ 0, and MC is constant so that ATC = AVC =MC = $20)
A) Draw the marginal revenue function for this firm.
B) What is the profit maximizing price for this firm?
C) On the graph show the area which represents the net loss to society resulting from the monopoly power conferred by the patent.
D) What do you predict will happen to the structure of competition and to the price in this market when the patent expires ? (Hint: use the concept of "Minimum efficient scale " of production in your answer.) .